Question

How much interest does Ms. Paris earn on an $1800 loan for 6 months with a simple interest rate of 8.5%?

Answer 1

Answer:

$1136.60

Step-by-step explanation:

The formula for exponential growth is f(x) = a(1 + r)^x where a is the initial value, r is the growth rate, and x is the number of time intervals.

We know that Mr. Paris starts with an $1800 initial value, so we can substitute that into the equation:

f(x)=1800(1 + r)^x

We also know the time intervals is 6 months. So that can be substituted as well:

f(x)=1800(1 + r)^6

They told you that the growth rate is 8.5%, which is 0.085 of 1.

f(x)=1800(1 + 0.085)^6

Add the 2 values in the parentheses and you get 1.085

f(x)=1800(1.085)^6

Now solve.

Order of operations requires you to raise 1.085 to the 6th power before multiplying by 1800. So then you have this:

1800(1.63146751) = 2936.64152. That rounds to 2936.60

So $2936.60 is the total amount of money in the bank account, but were looking for the interest earned, which is the difference between the end value and the initial value.

$2936.60 - $1800 = $1136.60